Warehouse Inventory Management – A Complete Guide

|Updated on: March 21, 2024

You may not know it, but the way you manage your warehouse inventory determines the profitability of your business. This is especially true for small businesses. A properly managed warehouse inventory has a significant positive impact on order fulfilment, delivery, and customer satisfaction, all of which translate to more sales and profit.  

Managing warehouse inventory requires you to follow the right warehouse inventory management processes. 

Here’s a complete guide to warehouse management, its importance and best practices you can employ to manage inventory efficiently. Let’s dive in:

What is warehouse inventory management?

Warehouse inventory management is the process in which the stock stored in the warehouses is managed through a series of tracking and audit mechanisms. It includes all the activities right from accounting for the stock when it enters the warehouses to the time it reaches the customers. 

This process involves a thorough understanding of the layout of the warehouse, types of storage facilities for each type of stock, restocking levels for each type, optimal inventory levels and more. 

In warehouse inventory management, you ensure that your employees are able to navigate around the warehouse without any hassles or safety issues for fulfilling the orders of the customers.

What are the processes involved in warehouse inventory management?

Here is a brief overview of the different kinds of processes that happen in a typical warehouse inventory management department:

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  • Getting the goods inside the warehouse
  • Recording the entry of every piece of inventory accurately
  • Identifying the appropriate storage areas for the inventory  you receive
  • Receiving orders from customers
  • Managing the packing processes based on these orders
  • Having proper documentation of the invoices and bills for these orders
  • Taking care of returns from customers, if any, and accounting for them separately
  • Conducting regular warehouse audits to check the optimal level of inventories, thereby avoiding excess stock or stock-out issues
  • Reordering inventory and replenishing them based on historical data or market trend-based demand forecasting

Common techniques employed in warehouse inventory management

Warehouse inventory management is a broader and more complex term than inventory management. So, it is suitable for big businesses and industries. Some of the common techniques that a typical warehouse inventory management include are:

  • Just in Time (JIT) – Here, you manufacture or procure goods only when you notice a demand from the customers. This way, you can send out the inventory as soon as it arrives in your warehouse, helping you reduce your carrying costs considerably.
  • Cross-docking – This is almost similar to the JIT methodology. Here, the receiving and loading compartments are placed in such a way that the goods are loaded as soon as the warehouse accounts for their entry.
  • ABC analysis – Classifying inventory into A, B and C, with A being high-value items that contribute to 80% of your revenue, B being items contributing to 15% of your revenue and C being items contributing to 5% of your revenue
  • Two-bin method – Though it’s not used widely today, this method works well for small businesses. Here, your goods are placed in one bin, and the reserve goods of the exact type are placed in the second bin. When the first bin is empty, you know it’s time to replenish your stock, and the fresh stock will arrive before you use up the stock in the reserve bin.
  • Fixed order quantity – In this process, you determine the reorder threshold of each type of stock, and replenish accordingly when the inventory goes below this threshold.
  • Fixed period ordering – Here, you reorder inventory at regular time intervals. While the quantity will remain constant most of the time, it will increase considerably during festive and holiday seasons.
  • Vendor-managed inventory – Here, you share your sales trends, historical data, customer feedback and other relevant details with a vendor. The vendor, in turn, takes the responsibility of ensuring you have the right levels of stock at all times.
  • Drop shipping – In this system, you don’t have to hold or own any stock. When you receive an order from a customer, you procure that product from a supplier to be shipped to the customer directly. Today, most e-commerce companies follow this methodology of warehouse inventory management.

How warehouse inventory management software can help businesses

Having a well-managed warehouse inventory management system can provide the following benefits for your business.

  • Helping you understand the warehouse layout better and make the best use of floor space, reducing operational and carrying costs considerably
  • Automating processes to have a better control in tracking real-time inventory to reduce issues like stock-out, missed stock, delayed delivery, excess stock and more
  • Helping you have proper systems and equipment in place, leading to motivated and productive employees
  • Making your supply chain cycle as robust as possible

Bottom Line

When you implement the right warehouse inventory management strategies, you see a visible improvement in your business productivity, profitability and efficiency. Combining these strategies with the right inventory management software can reduce your operating costs and mitigate human errors to the maximum possible extent. Fulfilment of customer orders will also become a more streamlined process, thanks to an effective warehouse inventory management model. 

If you are looking to integrate warehouse management software into your workflow, Tally can be your best bet. Packed with powerful features that lets you optimise your warehouse inventory operations, it streamlines even the most complicated tasks, allowing you to enjoy improved productivity. For more information about TallyPrime, click here

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